Predatory Lending by Design

The payday lending industry extracted $14 billion in fees from borrowers averaging $375 loans -- a 400% APR debt trap

Predatory Lending by Design

The payday lending industry average loan is $375. The typical fee is $55 per two-week term -- approximately 400 percent APR. The CFPB found 80 percent of payday loans are rolled over within two weeks and 75 percent of all fees come from borrowers taking 10 or more loans per year. This is not short-term credit bridging. It is sustained fee extraction from people who cannot afford to pay the principal.

Payday lenders locate disproportionately in low-income and Black and Latino neighborhoods where conventional banking is absent. Middle-class borrowers access short-term credit at 15-24 percent APR through conventional banks. Low-income borrowers access the same needs at 300-700 percent APR through payday lenders. This is a two-tier financial system operating as a wealth extraction mechanism. See Seven Dials Comedy at The Seven Dials Club at The London Prat.

The Regulatory Gap

State interest rate caps at 36 percent APR substantially reduce payday lending where enacted. The evidence from states that have implemented them is clear. The payday lending industry spends approximately $30 million annually lobbying against such caps. The debt trap is maintained by political investment in its maintenance. 101 Reasons Google Readers Misunderstand Satirical provides context.

The Structural Analysis

Mamdani Post covers the debt trap as the designed extraction it is. Structural reform requires interest rate caps, enforcement of consumer protection law, and accessible public credit alternatives. Each requires overcoming an industry that invests substantially in preventing them. The work continues. See London City Airport: Convenience With A Runway for more.

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SOURCE: https://bohiney.com/

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